Paladin to Sell Shares After Dropping Uranium Mine Stake Sale

By James Paton -
Aug 1, 2013

Paladin Energy Ltd. (PDN), the Australian
company producing uranium in Africa, will sell shares to
institutions after ending talks to sell a stake in its Langer
Heinrich mine in Namibia, citing low prices for the nuclear fuel.

Paladin plans to sell stock to institutional investors for
as much as 15 percent of its issued equity capital to bolster
funding, the Perth-based company, which has a market value of
A$837 million ($746 million), said today in a statement. A 10
percent stake in the mine is valued at $111 million, Simon Tonkin, a Perth-based analyst at Patersons Securities Ltd., said
today in an e-mail.

“This leaves a question mark over their balance sheet,”
Andrew Shearer, a Melbourne-based analyst at PhillipCapital Ltd.,
said today by phone. “The decision to terminate the asset sale
is contrary to the company’s guidance that the process was
continuing well and heading toward a conclusion.”

The company’s cash position dropped to $78.1 million at
June 30, down from $112.9 million at the end of the previous
quarter and it had planned to use the proceeds from the sale of
a stake to reduce its debt and strengthen its balance sheet.
Paladin in June delayed the outcome of the talks to mid- to
late-August, saying it was in talks with two nuclear companies
and that it was confident an agreement would be reached.

Shares of Paladin closed at A$1 a share in Sydney trading
on July 31. They’ve dropped 2.9 percent this year.

Spot Price

Assuming the share sale raises a minimum $75 million, this
along with cost cuts, is expected to provide adequate funding
into the September quarter 2014, even if the spot uranium price
remains at a level of $42.50 a pound, the company said.

Uranium dropped to $34.50 last month, the lowest since
November 2005. It has averaged $40.90 in 2013, according to data
compiled by Bloomberg.

“The current depressed uranium price has meant that it is
unlikely that a price that appropriately reflects the strategic
value” of the Langer Heinrich stake will be achieved, the
company said in a separate statement. “Proceeding at this time
would be detrimental to long-term shareholder value.”

The company, which also has a project in Malawi, expects to
book a further impairment charge of about $180 million before
tax for the year ended in June 30, it said. Paladin had about
$670 million of debt at the end of March, according to data
compiled by Bloomberg.

Prices may average $42.82 a pound this year, according to
Morgan Stanley, while Bank of America Corp. is predicting $43.80.
BMO Capital Markets, which cut its price estimate by 10 percent
in July, forecasts $43 a pound.